Washington Highlights

March 11, 2016—The Center for Medicare and Medicaid Services (CMS) March 8 releasedthe Medicare Program Part B Drug Payment Model proposed rule to test a new payment model that is intended to improve value and outcomes, and reduce expenditures for Part B drugs. The proposed rule reflects concern that drug payments have increased at an annual rate of 8.6 percent since 2007. The proposed model will occur in two phases.

Currently, many Part B drugs are paid based on the Average Sales Price (ASP) plus a statutorily mandated six percent add-on. All providers and suppliers furnishing and billing for Part B drugs would be required to participate in the model, however, some will be placed in a control group and will continue to be paid under the current payment system while others will be paid under the new system.

For those in the new system, starting within 60 days of publication of the final rule, CMS will change the add-on payment to 2.5 percent plus a flat fee of $16.80 per drug per day, starting in the fall of 2016. The flat fee will be updated at the beginning of each year based on the consumer price index (CPI) for medical care from the previous 12-month period.

Phase two will begin no earlier than January 2017 and will apply to those in the control group as well as those paid under the new model. CMS will expand the payments to test an array of value-based pricing strategies to improve the value of drug payments, which include: discounting or eliminating patient cost sharing, indications-based pricing, referencing pricing and others.

The AAMC is evaluating this rule and will provide members with further information. Comments are due May 9.